Sanmar Speciality Chemicals Limited Vs ACIT Company Circle (Madras High Court)
Madras High Court held that the provisions of Section 40A(7) of the Income Tax Act would override Section 43B of the Income Tax Act provided conditions under clauses (a) and (b) of section 40A(7) are satisfied.
Facts- The appellant / assessee is engaged in the business of manufacturing and sale of specialty Chemicals and Biotechnology products. One of the issues picked up for assessment relates to a provision made towards gratuity fund with the Life Insurance Corporation of India (LIC). The assessing officer notes that the claim had been made as per the provisions of Section 40(A)(7)(b) of the Act. He was however of the view that though the narration in the schedules to the balance-sheet and profit and loss account stipulated that the amount was towards gratuity, it was only a provision. Hence, the claim was hence hit by the provisions of Section 43B of the Act which requires certain claims to be allowed only on the basis of actual payment. The provision was thus disallowed and the amount of Rs.31,24,172/- added back to total income.
CIT(A) allowed the appeal. Being aggrieved, revenue has preferred the present appeal.
